Effects of Lapse in Funding for Government Departments and Agencies

The Federal Government may encounter another funding gap if Congress fails to enact a debt limit extension. The effects of a gap on Federal operations and services include lost productivity, discontinued payments, disruptions in services, lowered respect for the Federal Government, and some direct costs. Delays could increase borrowing costs to the Government, raise uncertainty in financial markets, and call into question the fiscal integrity of the Government as the probability rises of an actual default on the redemption of Government securities. Since the growth of the public debt is in large measure the result of revenue and expenditure decisions made by Congress and the President, a prudent course of action would call for incorporating the debt ceiling decisions as part of the budget resolution. Furthermore, Congress should make the entire debt ceiling permanent to prevent possible funding gaps. A review of the timeliness and content of Office of Management and Budget impoundment reports to Congress in accordance with the Impoundment Control Act showed that delays exist and impoundment justifications are often inadequate. An increase in the volume of impoundment proposals in the last 2 years appears to have caused a corresponding increase in delays in transmitting impoundment messages to Congress. Joint House and Senate resolutions propose an amendment to the Constitution which would alter Federal budget procedures and would require Congress to adopt statutory regulations during each fiscal year to require total outlays to equal total receipts. If outlays are larger, Congress or the President would have the authority to reduce them. Although presidential reductions would not be subject to the Act, to insure congressional participation in the impoundment process, Congress should either amend the Act or provide some other mechanism to regulate the reductions.